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Rat Races and Glass Ceilings

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Author Info
Peter Bardsley (University of Melbourne)
Katerina Sherstyuk (University of Hawaii)

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Abstract

In an ongoing organization, such as a large law partnership firm, employees are motivated not only by current rewards but also by the prospect of promotion, and the opportunity to make the rules in the future. This leads to a recursive contract design problem in an overlapping generations environment, where current agents may become future principals. The principal offers, and promotion-motivated agents accept, harsh rat race contracts with low wages and high effort levels. Hiring and promotion probabilities emerge as the preferred instrument to screen high cost workers, who face employment barriers and a glass ceiling.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Topics in Theoretical Economics.

Volume (Year): 6 (2006)
Issue (Month): 1 ()
Pages: 1297-1297
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Handle: RePEc:bep:thetop:v:6:y:2006:i:1:p:1297-1297

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Related research
Keywords: recursive contracts mechanism design overlapping generations adverse selection

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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